Credit cards, car finance, store cards and unarranged overdrafts are just some of the products which could see exorbitant charges capped by the City watchdog in its latest review into companies charging borrowers through the nose.

The Financial Conduct Authority said the time had come for providers to face an investigation into the charges they slapped on borrowers.

Many of those affected are often forced into taking credit with high rates of interest because poor credit scores mean they are locked out of the other side of a two-tier borrowing world, where record low rates are on offer.

Credit cards, car finance, store cards and unarranged overdrafts are just some of the products which could see exorbitant charges capped

Other credit products such as motor finance, credit cards, overdrafts and some instalment lending may be high-cost, particularly for less creditworthy customers or depending on how they are used.

Andrew Bailey, chief executive of the FCA, said: 'We have already taken many steps to address the risk of consumer harm by putting in place new rules for high-cost short-term credit firms and taking action against non-compliance across all credit markets.

'Now is the right time to take a broader view of the issues around high-cost credit, including unarranged overdrafts, and to consider whether our requirements remain appropriate.'

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HOW THIS IS MONEY CAN HELP

THE £444 WASHING MACHINE THAT COSTS £1,326

The cost of high interest rate credit can add up substantially over time.

Consumer goods specialist Bright House, which operates in the so-called rent-to-own sector, has the following example on its website, which shows a customer paying £1,326 for a £444 washing machine over 156 weeks.

The breakdown shows the Beko 9Kg Ecosmart washing machine has a product price of £443.67, but it cannot be bought without the 5 Star Service package, which takes the price up to £667.26

With a weekly payment of £8.50 over 156 weeks at an interest rate of 69.9 per cent, the total payable is £1,326.

What happened with the payday lending rate cap?

It comes as Bailey revealed the watchdog plans to review how well the cap on payday lending is working to protect customers from getting irretrievably into debt.

In January 2015 the FCA banned payday lenders from charging more than 0.8 per cent interest a day and introduced a £15 maximum for charges made if a borrower missed their payment deadline.

At the same time lenders were told they were no longer allowed to charge borrowers more than 100 per cent of the total loan in interest, fees and charges meaning borrowers never have to repay more than twice what they borrowed.

Andrew Bailey: In January 2015 the FCA banned payday lenders from charging more than 0.8 per cent interest a day

The FCA promised to review whether these rules were working after two years and has said it is now looking for 'any evidence of consumers turning to illegal money lenders directly as a result of being excluded from high cost credit because of the price cap'.

Could it be extended to other high cost credit?

Since the FCA took over regulation of payday lending, credit cards and other forms of high cost borrowing in April 2014 it said 25 per cent fewer borrowers had fallen behind on their loans, while 800,000 fewer people took out a payday loan over an 18-month period.

Over the next three months the the regulator will look across all high-cost products to work out whether caps on interest and charges should be brought in for other types of lending including credit cards, overdrafts, store cards and catalogue credit.

Mike O’Connor, of StepChange Debt Charity, said: 'The cost and design of these products can trap people in cycles of repeat borrowing which deepens their financial difficulties. Every day our advisers see people who are damaged by these products.

'Further FCA intervention is necessary to address the problems that still exist in the market, including lenders moving from traditional payday loans to instalment loans, the continued problems caused by people accessing multiple loans, and the poor treatment of customers.'

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